Saturday, September 16, 2017

Is Gwadar a toll plaza?

http://nation.com.pk/columns/16-Sep-2017/is-gwadar-a-toll-plaza

September 16, 2017

China-Pakistan Economic Corridor (CPEC) is a big business scheme with billions in Chinese investments spreading over the span of 15 years with a cumulative outlay of up to $46 billion.
$35 billion is to be spent on the energy sector in the mode of IPPs (Independent Power Producers) and remaining $11 billion for infrastructure developments such as railways and industrial zones, roads etc.
An additional $8.
5 billion of investment is recently approved for transport sector.
The blessing in disguise is that most of the investment project loans are from Chinese banks, whose details are still not made public.
Indeed, it is generating fears of further indebtedness of an already loan-riddled Pakistan.

The construction of a 3,218 km long route stretching from Chinese province of Kashghar to Pakistani port of Gwadar, is considered to be hallmark of this CPEC project.
By the construction of this shortest route, Chinese goods will have much easier and quick access to the Middle East, Africa and beyond.
As currently, these goods have to travel a long distance of approximately 10,000 km from the South China Sea through the Strait of Malacca to reach the Gulf.
A special force of 15000 Pakistani troops will be deployed to protect CPEC route.

The advocates of CPEC refer it as a game-changer for Pakistan and this region.
In contrast, opponents including some of the leading economists remain sceptical about the impenetrability of projects under CPEC and in specific the terms and conditions of loans Pakistan is acquiring from China under this project.
In my view, the government considers CPEC to be soothing for Pakistan economy, whereas for the experts and some economists, it is another form of “East India Company”.
But, it requires detailed synopsis at end of both parties to build any constructive analysis.

If CPEC is viewed from objective perspective then it is not a gift for Pakistan, indeed it is a set of complicated riddles of infrastructural investments which will be by and large paid by Pakistani investors, poor consumers and tax payers in the form of commercial loans from Chinese banks.

Now having a glance at the energy sector with $35 billion investment with detailed investigation into independent power producers, (IPPs) the real players are bringing coal from China despite the extraction of coal- enriched deposits from Pakistan.

It clearly implies that China channelling a strategy with aid of these projects to dump it excessive resources such as coal in Pakistan.

Moreover, IPPs have further bound the government of Pakistan to buy electricity from their power houses for at least 30 years even if there is any need of it or not.
In addition, it is a more expensive rate than offered in the international markets or existing electricity production in Pakistan.

In addition, for China CPEC provides an alternate secure route to import energy and find new markets for its goods and services.
Approximately 80% of the China’s oil is currently transported via Strait of Malacca to Shanghai which almost covers a distance of 16000 km and travel time of 2-3 months.
In contrast, after the operations at Gwadar port distance will be reduced to less than 5000 km.
It will be great strategic benefit for China as it will provide access to convenient mobility with significant reduction in the travel time.
On the other hand, it will also benefit Pakistan by giving it an edge in the region, especially while countering Indian influence.
Moreover, it will also act as major transit point by connecting Eurasian region South Asia and South East Asia

In light of the CPEC project, there is no level playing field as Pakistan is not generating enough opportunities from the matrix other than the growing demand for learning Chinese language.
In my view, Chinese language is not enough to integrate, secure and equilibrate the dividends.
Indeed, there should be proper planning by government and immediate adoption of technology at research centres, local universities, technical and vocational institutes to attain fruitful outcomes of the projects.

Recently, a Shanghai based consortium bought 40% share in the Pakistan Stock Exchange amounting to $85 million and in no time will take charge of its management as the size of market capitalization is around $100 billion.
Now with this growing influence of China in Pakistan financial markets will definitely overshadow the authority of the IMF and World Bank.
Although IMF has also warned that CPEC could add to Pakistan’s medium to long term risks by forecasting country’s external financing requirements to rise by $15.
1 billion by 2018-19 with current financial year amounting to $11.
4I billion.
It clearly indicates the Chinese ruling class has the full potential to emerge as new imperialist power in the region in short span of time.

Now, this makes CPEC a big mystery or an illusion; instead of reducing poverty it will foster exploitation and unemployment.If the infrastructural development has prospects for poverty elimination then there should be no poor in India and China.

Chinese trucks will roll on the road from Kasghar to Gwadar, where Pakistan will merely act as a ticket collector on Gwadar toll plaza.

Indeed, Pakistan has to take care of the road maintenance from its very own pocket.

The plan of establishment of new industries along the CPEC route is still a dream for local Pakistan economy as they are still waiting for the promised industrial zones to be built along the Motorway many years ago.

Furthermore, it is claimed by the Pakistan government that CPEC project will generate somewhat 700,000 direct jobs by 2030.

But, rather than creation of jobs it is feared that with passing years of CPEC there will be closure of Pakistan local industry due to intense competition by Chinese high tech companies.

This seems like a horrific picture by all means.
Given the current scenario Pakistan may be facing a situation like Greece as there is no sign of us meeting financial requirements at our end.
There is little chance that Pakistan could effectively and technically exploit maximum benefits from CPEC.
Indeed, it will have to go back to IMF next year with high amount of debt on its shoulders.
But the government obsession with CPEC game is strong, which is like national anthem for them around which all the political parties revolve around.

The writer is a Master Trainer/Advisor at the Pakistan Industrial Technical Assistance Centre Lahore, under the Federal Ministry of Industries and Production, Islamabad